Student loans – is this sustainable?

Is it me, or are these absolutely doomed?

the average graduate is liable to graduate this year with £44K of debt. This will go up for future years as the govt converts maintenance grants to loans.

By my calculations, on 44K of loans they’ll need to be earning £49K just to cover the interest.

Which, as at 2013, would put them in the 90th percentile of earners in the UK.

So the vast majority of graduates will never even dent the initial capital, let alone actually pay it off. Is it me, or is this completely unsustainable?

Are we saving up a massive problem for ourselves (and our future graduates?)

It’s just a different way of taxing graduates, you pay more to repay the loans but the loans are mostly left unpaid. Great way of raising a grad tax without calling it one.

Like most things though, want to fund universities find the cash from somewhere.

It may also make some people think twice before taking on a degree because everyone else is doing it.

It’s not sustainable.
It’s even worse in the US.

What Mike said, it’s a “university tax”. You only have to pay it if you actually ever earn enough to benefit from your education.

TBH, I think the repay threshold is too low but putting it up won’t win any votes so they don’t do it. They would be better off saying you need to earn 125% of the average national wage before you start paying back – without doing any maths, that seems fair to me.

It’s all Tony Blairs fault anyway – the “50% of school leavers should go to university” seems to have removed a lot of vocational routes to work.

this is not new.

i was one of the first students through the loans/fees system (1998). i’m still in ‘debt’, and probably will be until the debt is written off.

Sustainable in what sense? Because writing off the “loan” isn’t sustainable? I may be naive in assuming they’re expecting a lot of the loans to be written off after 30 years and have factored that into the financial model (in reality it’s just “somebody else’s problem”, and part of the culture of deferring paying for everything).

As mike says it’s just a grad tax – I’m always bemused by all the left leaning people complaining about the new system when it’s only very well off graduates who are worse off under it.

Problem is that because ‘everyone else is doing it’ then it becomes the general educational starting requirement, as A levels was 20 odd years ago, so necessary to get yourself all that debt just to find any reasonable work for youngsters nowadays.

I find it quite worrying for my daughter, who really has no clue at 15 what area of work she wants to be in, and I’ll really be trying to dissuade her from going to university until she has. Getting into that amount of debt as a holding position, which is what I suspect a lot of youngster do is frightening.

I believe under the latest rules the debt is written off after 30 years.

I also believe the debt has been sold to a private company. Or is that just the administration of the debt?

Sounds like the government is just deferring the cost of funding university and they’ll have to swallow the debt in the end. (a bit like PFI?)

The amount that will be repaid by the student (as an average, based on a 3sigma ND) will be approximately equal to that of a student under the last series of loan commitments and fees £3k. The rest will be written off.

Is it sustainable…that depends upon what interest rate the government is paying on it’s borrowing and number of students earning above average wages. the universities have already bee paid.

You have to remember that it’s not real debt – if you want to go to University, you can then drop out and live whatever alternative lifestyle you like without ever being chased for it.

The whole degree/university debacle is unsustainable, and their bubble will burst at some point, despite the drive to recruit foreign paying students.

I did a part time degree finishing in 2005 – back then, lecturers were telling stories of first year students being well short of the required standards, of students who had clearly failed in one year being allowed back in the next in order to get bums on seats and fees paid, and those were the words they were using.

We now seem to have created a whole industry around collecting interest on unpayable student loans, for no real purpose.

And don’t get me started on the “need” to have a degree, especially people like nurses and social workers who have had to get themselves a degree in the last 20 years to keep the jobs they were already doing – CPD is an obvious requirement, but a full blown degree or even Masters? I started work in insurance and spent 5 years getting my professional qualifications, now you can get a degree in insurance and then still need professional qualifications. Why?

Be much easier if we just slapped 2-3% on graduates income tax and got the money back this way.

Interesting “discussion” with my parents the other day – I was the first in the family to go to uni/poly and it was all they wanted for me. Broke their hearts when I jacked it in halfway through the first term to get a job. Whereas I really don’t want my kids to go to uni unless it is for something they really love and want to for a career.

Sounds like the government is just deferring the cost of funding university and they’ll have to swallow the debt in the end. (a bit like PFI?)

So before when they covered the cost of the courses and funded people by grants and never expected to see a penny back. Now those who do well repay something, it’s a better system if you just ignore the numbers.

We seem to have turned university’s in to private company’s and they persuaded the government to lend money to their customers so they can make nice profits.

Great business model, but its pants for society.

Education should be free and controlled to ensure it is efficient. The only involvement of private company’s should be to tell educators what sort of graduates they need.

Sustainable in what sense? Because writing off the “loan” isn’t sustainable? I may be naive in assuming they’re expecting a lot of the loans to be written off after 30 years and have factored that into the financial model

I suppose they’ll have to have done. Presumably the interest rates charged will cover the cost of the loan administration. But it seems really odd that we’ll effectively have a system of ‘loans’ where it’s expected that something like 95% of them are written off in whole or in part.

I mean someone on an average graduate starting salary (22K IIRC) will see their debt increasing by about £1000 per year. They don’t really stand a chance.

TBH, I think the repay threshold is too low but putting it up won’t win any votes so they don’t do it.

No, in fact they’re effectively putting it down. Current plan is to freeze the threshold at 21K for 5 years. Which is a bit harsh considering they promised students that they would increase it in line with inflation.

this is not new.

i was one of the first students through the loans/fees system (1998). i’m still in ‘debt’, and probably will be until the debt is written off.

Me too, I graduated in 2001 and am still in student debt now. But this is a different order of magnitude.

It’s not really a loan as many won’t ever ay it back is a graduate tax but governments don’t like to use the word tax

money saving expert

The far bigger problem (for taxpayers) is that they are ‘dressed’ up as a loan that’ll be repaid, when in fact a large percentage won’t be and the write-off will be added to the UK’s debt.

http://www.telegraph.co.uk/education/educationnews/10747315/Six-in-10-students-will-have-their-debts-written-off.html

Not like they are wasting it though…

UCU release report on vice chancellors’ pay

The report states that 18 vice chancellors had salary increases of more than 10% pointing out that this comes at a time when university staff had to take industrial action to secure a 2% raise.

People seem to want to go to uni AND do the daft courses that are worth what?

Then there are those that dont complete/finish. I knew a few bright people who just got into partying too much and one that was on her back the almost entire first year and the rest sleeping/recovering.

If I was considering Uni now it’d only be for really employable/worthwhile subjects.

The far bigger problem (for taxpayers) is that they are ‘dressed’ up as a loan that’ll be repaid, when in fact a large percentage won’t be and the write-off will be added to the UK’s debt.

Well that’s my concern.

That and the naughty bit of Osbornian doublethink that says it’s unfair to expect high earners to pay a 50% marginal income tax rate, but it’s fine for new graduates to pay what could be 49% for 30 years in servicing their loans. When did we have that debate?

I started uni in 1999 (so a smaller debt compared to todays students), have PG degrees from top 5 ranked universities in a STEM subject, stong experence but still don’t expect to pay off my debt. I’m the first to admid my career choices have not been optimal but I am in a better position than most, let alone somone with a second class mangment of curtains degree from university of diddly squat. Very few will ever pay off all of their loans IMO.

They always were, weren’t they? It’s just the method of government funding of those private companies for providing a service to society which has changed – not really any different to the thousands of other private companies providing services in the public sector.

and they persuaded the government to lend money to their customers so they can make nice profits.

Better or worse than the government giving money to their customers to pay them with?

Now those who do well repay something, it’s a better system if you just ignore the numbers.

I’m not so sure. Because of the huge expansion in tertiary education a degree is now becoming an entry level qualification. Teaching and nursing being the obvious but not only examples of this. So you are creating a lot of needless debt with the only obvious beneficiary being the university “industry”.

We seem to have turned university’s in to private company’s

How come all the Scottish universities then feature in the ‘100 biggest charities and trusts in Scotland’ spreadsheet I have?

I had a loan from 2000 – 2004 when I did my degree. Shortly after I graduated they changed the goal posts on how they charged the interest.

I think I worked out I have so far paid back about £22,000 of a £17,000 loan over the last 10years (including three working abroad at higher rate totaling about £4200) and still have approx £7700 left to pay…

For the first 2 years of employment I was earning <20k pa however the threshold for repayments was £15.5k at that time, so the entire time I have been employed I have made repayments even though the wages for my industry are lower than the graduate average.

The must have a degree thing has been going on for 20 odd years, see Blair’s 50% game. That needs fixing as much as anything else.

Only a “big problem” for those who don’t realise what’s happening. As I wrote above, at some level there has to be some calculation about the amount being written off and that is just factored in to the costings. I suppose it is a sneaky way for them to add more onto the public debt, but it’s hardly worth the bother given how small a proportion of the deficit it is. It’s all just smoke and mirrors because for some reason a grad tax is unpalatable.

Considering the government previously paid the fee’s you now get a loan for how does it change the cost to the tax payer?

Meh, it’s not like it gets counted against you as ‘debt’, if you think of It as a tax its marginally more acceptable.

Graduated in 2008, paid mine off in April, which is nice!

Since when has teaching not been a graduate profession?

The must have a degree thing has been going on for 20 odd years, see Blair’s 50% game. That needs fixing as much as anything else.

That is how it is in the rest of the world. If we stopped and reverted back to the 50’s like some commentators seem to want, we would end up the least educated country in the developed world.

Germany, Spain, France, Singapore, Australia, America, Japan etc all have similar rates of higher education as us.

Any industry that needs half way educated individuals will set up shop wherever governments subsidise them by training people on government funded university places instead of industry funded places.

Since when has teaching not been a graduate profession?

Early/mid 80s?

yes but it still doesn’t mean that 50% of jobs require a 3+ year degree, did this to death last time, plenty do, plenty could take good people, train them as they work and save them and the tax payer a lot of cash, maybe then we could fund those that really need the help to do things really useful.
A decent number of those I went to uni with are using very little of the 3-5 years they spent “learning”, I’m glad in some ways I got out after 2 and my uni loans are gone.

Considering the government previously paid the fee’s you now get a loan for how does it change the cost to the tax payer?

Well, going on the current projections, it will cost the taxpayer more than the 3K tuition fee system anyway. And that’s on top of what the ‘graduate tax’ brings in

http://www.ft.com/cms/s/0/5431b544-babc-11e4-945d-00144feab7de.html#axzz3hwKQSBSk

I agree – but industry doesn’t like spending money if it can employ people who are already trained. If we end up with a lack of graduates, then wages will shoot up and industry…I guess…may start looking at setting up shop somewhere else.

Also, for example, there are a lot of small start up pharmaceutical companies at the moment….looking to employ graduates in the long term. I am not entirely sure they would be able to fund the training of graduate level biologists.

I don’t think that it’s any coincidence considering their economy, that higher education is totally free in Germany – even for non-eu nationals.

Early/mid 80s?
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I thought it was rather earlier than that – hardly a modern thing anyway. Would it be preferable for teachers to be less educated?

Yep you know pharma Tom, not one that generally comes up as on the job though is it.

“A decent number of those I went to uni with are using very little of the 3-5 years they spent “learning”, “

I use very little of the maths i learned at uni…..

i use all of the enquiry and investigative skills i learned.

did the full 4 year course and like NJEE i graduated in 2008 – paid off my loans in 2010 and was glad to see the back of the SLC – some of them lot must have gone and done a uni course in incompetence to get a job there.

still have to deal with them for mrs T-Rs 5 years of uni to be a teacher.

Well, lab work kind of used to be a lot more on the job Mike. Not sure it could be these days – as the complexity within those kinds of jobs has ballooned.

Well, going on the current projections, it will cost the taxpayer more than the 3K tuition fee system anyway. And that’s on top of what the ‘graduate tax’ brings in

That was always the plan, it was designed to be far more progressive but this failed to be communicated successfully – present figures suggest the England and Wales system encourages more low income students to attend university than the fee free Scottish one.

Loans that don’t get paid off sound remarkably like grants to me.

it still doesn’t mean that 50% of jobs require a 3+ year degree

I certainly agree with that, especially looking at the number of graduates who end up working in call centres and not using their education.

It’s all Tony Blairs fault anyway – the “50% of school leavers should go to university”

So very much this.